Blend Network’s recent column in DFT

Blend Network Chief Strategy Officer Roxana Mohammadian-Molina wrote a column in yesterday’s Development Finance Today. In case you missed it, you can read it below:

Read it online here: https://bit.ly/3d2UFCp

‘Whatever it takes’ are the words on every self-respected politician’s lips as they pledge to get the economy back on its feet after the crisis. And Roxana Mohammadian-Molina argues that alternative lending platforms such as peer-to-peer lenders are one of the Government’s silver bullets to channel funding to where it is most needed: housebuilding.

According to recent analysis conducted by Knight Frank, as a result of Covid19 and the knock-on impact of the government lockdown, the UK is set for a historic decline in housing delivery. Indeed, the research shows that the current lockdown will result in 56,000 fewer homes being delivered this year, a 35% decline [1]. The decline means that the UK’s housing shortage, already a high-profile issue that has been described by successive governments as the nation’s most urgent and complex challenge and solving it as “the biggest domestic policy challenge of our generation”, will become an even greater concern over the next few years.

Yet as the Chancellor of the Exchequer Mr. Sunak pledges to do ‘whatever it takes’ to get Britain back to work, while scratching his head on how he is going to achieve that, he may find a key ally by looking closer to home. Alternative finance platforms such as peer-to-peer (P2P) lenders can and must be part of the solution by working with traditional lenders to channel much-needed funds to property developers to avoid a protracted impact on Britain’s housebuilding activity.

A commonly cited figure in current debate around the UK’s housing requirements estimates that 300,000 houses need to be built annually by the mid-2020s – 100,000 of which need to be affordable [2]. Even before the Covid19 crisis, the housebuilding targets were not being met. According to NHBC data, only 160,470 homes were built in England in 2017/18 (Figure 1). The Knight Frank report suggests that this is now set to deteriorate.

At a time when large-scale public borrowing will see an astonishing deterioration in public finances, we believe there will be renewed and indeed increased pressure for the Government to consider new and innovative sources of funding, including peer-to-peer property lending, to tackle the housing shortage. With the number of houses needed being so high and the housing shortage in all likelihood being exacerbated, we believe that all avenues must be explored.

Due to their nimbler size and the lack of heavy legacy processes, alternative lenders are able to move faster at a time when traditional lenders are being inundated with loan requests, prompting some lenders to warn that they may struggle to cope with the demand. Anne Boden, the chief executive of the digital lender Starling bank recently told the Treasury select committee that there would be some concerns about how quickly banks could ramp up their lending to cope with demand. The answer, we believe, is for the Government to support alternative lenders working closely with traditional lenders to help SME businesses and house builders at a time of national emergency.

Figure 1: Homes needed vs homes built